Senate Ways and Means Chairman Karen Spilka explains her committee's FY18 budget proposal with other members looking on. From left to right, Sens. James Eldridge, Sonia Chang-Diaz, Donald Humason, Patricia Jehlen, and William Brownsberger.

Weak collections so far spread concern, trigger search for new taxes

SENATE WAYS AND MEANS Committee members on Tuesday unanimously approved a $40.3 billion spending plan for fiscal 2018 that they said recognizes the state does not have as much revenue as it needs to pay for desired programs and service.

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With approximately $400 million in new revenues proposed, the budget tries to bridge some of that gap and invest in housing, health and education accounts, said Sen. Karen Spilka, the committee chairman. It increases spending by 3.3 percent over estimated fiscal 2017 spending, according to the committee.

Legislative budget writers and Baker administration officials all built their 2018 budgets on the assumption that revenues would grow 3.9 percent from the $26.056 billion expected in fiscal 2017, to $27.072 billion.

But as senators discussed their proposal, they acknowledged uncertainty over whether that assumption will stand, after weak April revenue collections more than doubled this year’s revenue gap to $462 million and Revenue Commissioner Michael Heffernan called for a second look at next year’s revenue projections.

“We recognize that we may need to adjust, and there have already been discussions with the House chair of Ways and Means, the secretary of administration and finance,” Spilka told reporters. “There’s close contact and we’re all monitoring it, and if we need to take action in June we will, but at this point there’s no consensus as to how much even we would make adjustments, so we’ll take a look in June.”

The Senate Ways and Means Committee said its budget has a total of $40.79 billion in spending, a number that includes a $452 million transfer to a medical assistance trust fund. House lawmakers and Gov. Charlie Baker do not include that money in their bottom lines. The Massachusetts Taxpayers Foundation, which includes the transfer in its estimates, tracked the final House budget at about $40.8 billion and Baker’s proposal at $40.9 billion.

Sen. Vinny deMacedo, the committee’s ranking minority member, said the Senate budget represents “the fifth inning of a long process.”

“There is a challenge in regards to the revenue picture that we’re looking at,” the Plymouth Republican said. “That’s something that I think is going to be played out in the sixth, seventh and eighth inning, and we’re going in next week, and we’re going to debate some other priorities.”

Budget deliberations are set to begin next Tuesday. Senators have until Thursday at 5 p.m. to file amendments, which will give a fuller picture of the full Senate’s tax policy agenda.

Like Baker’s and the House’s budgets, the Senate spending plan calls for the state to collect sales tax from online retailers. It proposes to generate $18 million from taxing short-term vacation rentals through websites such as Airbnb and $7 million from taxing online hotel room resellers such as Expedia on the full price paid by consumers.

Spilka said the committee had “lots of discussion” around taxes and ended up with a plan for approximately $400 million in new revenue, consistent with what the House approved in its budget.

“There’s a recognition by all that we don’t have the revenue that we need to meet our obligations,” the Ashland Democrat said.

Though Senate President Stan Rosenberg repeatedly has expressed interest in new revenues, the Ways and Means budget eschews broad-based tax hikes, which both Baker and House Speaker Robert DeLeo oppose.

Asked if Baker and DeLeo’s stances influenced her committee’s budget, Spilka said the panel “looked at the fiscal situation, and we based our recommendations accordingly.”

“If you look at it, it’s a little different,” she said of the Senate’s proposed new revenues. “There are some similarities, and the House is a little different than the governor, the Senate’s a little different than the House and the governor.”

The 2018 budget will be the state’s first to surpass $40 billion, and the pressures of growing MassHealth enrollments, debt service, pension obligations, and other fixed costs are again leaving little room for substantial discretionary spending increases.

“This budget demonstrates the commitment to the values we share, but it also demonstrates the lack of resources,” committee assistant vice chair Sen. Patricia Jehlen said. “It shows that we have a revenue problem, not a spending problem.”

Jehlen said the budget takes steps to implement the 2015 recommendations of the Foundation Budget Review Commission, which found the current school funding formula underestimates the cost of education by $1 billion to $2 billion per year, driven largely by health care and special education costs.

Like Baker and the House, Senate Ways and Means included funding to help school districts cover their health insurance costs. Spilka said there is also a “down payment” towards special education costs.

Spilka said the budget focuses on “education at all levels,” including $15.1 million to expand preschool access; a minimum increase of $30 per pupil in aid to local schools; and workforce training programs. It includes $545.9 million for community colleges and state universities, and increases funding for the University of Massachusetts by more than $26 million over 2017 to $534.5 million. The House funded UMass at $513.5 million.

A statement from UMass President Marty Meehan’s office said the Senate appropriation would “preserve affordability for students and their families.”

The budget directs $98.4 million to the stabilization fund and takes $15 million from a race horse development fund to provide funding increases to the Department of Environmental Protection and Department of Conservation and Recreation, Spilka said.

Spilka said the money in the race horse fund, created under the 2011 expanded gaming law, has “just been sitting there” and using it for conservation and recreation was consistent with the fund’s purpose.

The Ways and Means Committee allocates $52.9 million for the Department of Environmental Protection, including a new investment of $500,000 to ensure compliance with the federal Safe Drinking Water Act, according to the committee.

Through a spokeswoman, Baker expressed concern that the Senate budget didn’t allocate sufficient funding for numerous accounts and did not include savings measures favored by the governor.

“The Baker-Polito Administration proposed a balanced budget that reins in government spending while increasing investments in public education to historic levels and it is concerning that numerous accounts to pay for core services, like indigent legal services, are underfunded in this budget,” Lizzy Guyton, Baker’s communications director, said. “Additionally, the administration is disappointed that legislators dropped much-needed proposals to save taxpayers millions like the administration’s bipartisan welfare reform. The administration looks forward to working with the Legislature on a final budget that continues Governor Baker’s increased investments in public education while protecting the hardworking people of Massachusetts from tax increases.”